Public Liability Insurance Goes Through the Roof!
4 February 2002 at 12:02 pm
Cynthia Nadai is involved with Friends of Callan Park, a small community organisation attempting to protect Callan Park from being sold off to developers.
In December the small Not for Profit found its Public Liability insurance rates increase three-fold! Since then many, many more Not for Profits have seen their premiums go through the roof!
Cynthia posted her plight on our Pro Bono Australia On-Line Forum and another Forum reader Val Williams suggested she get a second quote from AON insurance broker for special rates organised by Volunteering Australia.
As many of you already know this is not an isolated case!
Businesses large and small are feeling the effects of massive increases to their Public Liability Insurance – some have shut their doors as a consequence. And now many Not for Profit organisations are struggling to find the funds to insure their many and varied activities.
At the top end of the charity market large event management is threatened because the organisations just can’t afford the Public Liability Insurance or the insurer just won’t cover the event!
A Queensland Council of Social Service Insurance Survey Report in July 2001 indicated a 30-40% increase in premiums with some increasing over 500%. See www.qcoss.org.au
The Victorian Government reported that the public liability insurance for the Melbourne Fringe Festival increased from $9,000 in 2000 to $63,000 in 2001.
The Australian Parachute Federation’s premiums have risen to $1.1 million in 2001 from $127,000 in 1999. The Queensland Women’s Amateur Sport’s Council insurance premium rose from $900 to $9,000 in 2001.
Even the humble jumble sale is under threat. Some small organisations have advised their volunteers and fundraisers to stop street stalls and white elephant sales until a solution or the money is found.
The Fundraising Institute – Australia believes the current situation puts many smaller Not for Profits in a very difficult situation.
FIA Chief Executive Officer, Wayne Clarke says the impact of the increases on Public Liability Insurance on small organisations (particularly sporting groups) is that they are considering extra fundraising to pay for the insurance hikes.
Clarke says the FIA believes this is inappropriate because fundraising is meant to allow these groups to take on new initiatives and is not really intended to pay recurrent costs such as insurance.
He says anecdotal evidence shows that many small Not for Profit sporting groups for example were paying just a few hundred dollars for Public Liability Insurance and now that figure has jumped to $4000.
He says he doesn’t believe these groups can sell enough chocolate bars to make up the shortfall!
The Victorian Employers Chamber of Commerce and Industry (VECCI) says anecdotal reports of the insurance plight on Not for Profits is growing with premiums for Public Liability Insurance doubling and in some cases jumping by ten times the current rate.
VECCI’s Chief Executive Officer, Neil Coulson says the insurance industry is claiming that a series of situations and conditions have all contributed to the increases in Public Liability Insurance.
Coulson says the industry claims that PL as an insurance product has been unprofitable for many years. Litigation is on the increase, the effect world wide of September 11 and the recent NSW bushfires have all added to an increase in premiums.
Coulson says that as a result there are only 3 or 4 players in the Public Liability Insurance market place willing to take on this kind of ‘risk’ insurance.
VECCI says that business and the community would, as a first instance, enjoy a bit more transparency from the Insurance Industry by demonstrating the incidence and type of claims involved in recent ‘risk’ insurance.
Neil Coulson says this would assist business and community groups understand the nature of ‘risk’ and give them the opportunity to develop better ‘risk management’ strategies and therefore become more insurable.
VECCI wants State and Federal Governments to meet with industry to discuss the current conditions, understand the causes and allow a bipartisan approach to assist organisations in obtaining appropriately priced insurance.
VECCI is carrying out a survey of its 8000 members to gauge the extent of the insurance increases and shed more light on the level of re-insurance, the level of increases and the level of ‘non-offered’ insurance.
And back to the advice from Val Williams who has been told that Landcare and Garden Clubs of Australia have formed groups to get lower premiums.
She says she believes the reason why organisations with volunteers can fairly ask for lower public liability premiums is that they do so much less work. For example, the average business is open 37.5 hours per week and is at risk for the whole of that time. A volunteer may work only 4 hours per month and may cause damage only during that 4 hours per month which would be a much reduced risk.
In Victoria, the National Party says volunteers would be exempt from legal actions in negligence under its plan to reduce the spiralling cost of Public Liability Insurance.
Party Leader, Peter Ryan, proposed a package of measures that he says could be implemented at state level to reduce the cost of insurance, which is threatening to change the way of life of all Victorians, particularly those in the country.
The measures proposed by Ryan include:
An exemption from civil negligence actions for volunteers and community organisations;
Reducing the size and number of damages awards by the introduction of a threshold of $36,000 before payments can be made and a cap of $4.5 million;
Changes to the way award payments are calculated to reduce the size of payouts.
Ryan, who was a litigation lawyer before entering politics, says these measures could be implemented immediately by state legislation and would not require the establishment of a costly bureaucracy or any taxpayer funds.
The Centre of Philanthropy and Nonprofit Studies at Queensland University of Technology has produced a Fact Sheet for the sector on How to Survive Rising Insurance Premiums. If you would like an electronic copy just send an e-mail to Pro Bono Australia at firstname.lastname@example.org.
Also send a fax to us on 03 9682 0199 if you would like a copy of the National Party’s Insurance proposal.
How has your organisation navigated the current PL insurance hikes? Tell us your point of view and join our on-line Forum at probonoaustralia.com.au. (Click on ‘Forum’ in the site menu across the top of the Home Page)